The Boardroom Under Scrutiny

by Kerry McDonald for, February 2011, 2011.

Kerry McDonald, chairman of Grant Thornton New Zealand Ltd, looks at the performance, or lack of performance, of company directors.

New Zealand company directors – in both the private and public sectors – need to have a much more rigorous and focussed approach to performance if they are to add value, live up to their potential, restore investor confidence and lift New Zealand’s productivity. In short, we need to spark a revolution in New Zealand’s corporate governance culture – maybe not among all organisations, but certainly in those that are not really cutting the mustard!

The Global Financial Crisis (GFC) and meltdown in New Zealand’s non-bank finance sector was immensely damaging and left investors with a jaundiced view of the markets, institutions, directors and regulators. Who can blame them?

And, as recent economic figures indicate, we are not out of the woods yet.

The extent of corporate and board failures in the USA is particularly sobering considering that it is less than a decade after Enron and the imposition of Sarbanes Oxley – designed to prevent a repeat performance. Yet, the GFC was a repetition, on a larger and more damaging scale, with little sign that the major regulators had any understanding of what was happening.

This hangover risks spawning yet another generation of New Zealanders – like that following the 1987 crash – who are unwilling to put their savings into equity or securities investments.

Property, with its low rate of effective taxation compared with rates on income from simple savings products, is likely to remain as the default investment for most. (continue reading… )



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